China Central Bank Official Says Bankruptcy May Benefit the Country
- PBOC’s Xu Zhong sees need to rein in local government debt
- Finance Ministry pledged to break expectations of bailouts
A man poses for a photograph in front of the People's Bank of China headquarters in Beijing.
Photographer: Qilai Shen/BloombergThis article is for subscribers only.
A Chinese central bank official said China should allow local governments to go bankrupt to help rein in regional authorities’ excessive borrowing.
A case like the bankruptcy of Detroit would convince investors that the central government is really determined to dispel beliefs of an implicit guarantee for regional authorities, Xu Zhong, head of research bureau at the People’s Bank of China, wrote in an article in the China Business News Monday. Just a couple of days ago, China’s finance ministry pledged to break the “illusion” that Beijing would bail out local governments’ hidden debt.